- 15 -
Andrews v. Commissioner, 79 T.C. 938, 940 (1982).12 However,
where actual sales prices are unavailable, the value of the
shares is determined by taking into account the company’s net
worth, prospective earning power and dividend-paying capacity,
and other relevant factors.13 Sec. 25.2512-2(f), Gift Tax Regs.;
see also Rev. Rul. 59-60, 1959-1 C.B. 237. These factors cannot
be applied with mathematical precision, and, therefore, the
weight to be given to each factor must be tailored to account for
the particular facts of each case. Estate of Andrews v.
Commissioner, supra at 940-941.
As is often the case where the value of stock in a closely
held corporation is at issue, the separation in the values that
the parties and their experts argue is substantial. The gift tax
returns that petitioners filed reported the fair market value of
a minority interest in HII stock as $120,000 per share.14 In the
12Since the same factors are used for gift and estate tax
purposes in determining the fair market value of property, we
cite both gift and estate tax cases. See Ward v. Commissioner,
87 T.C. 78, 101 (1986); Estate of True v. Commissioner, T.C.
Memo. 2001-167.
13The regulations provide that some of the “other relevant
factors” to consider are: The goodwill of the business; the
economic outlook in the particular industry; the company’s
position in the industry and its management; the degree of
control of the business represented by the block of stock to be
valued; and the values of securities of corporations engaged in
the same or similar lines of business which are listed on a stock
exchange. Sec. 25.2512-2(f), Gift Tax Regs.
14The gift tax values which petitioners reported on their
(continued...)
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011